B.C. forestry firms on board with China trip as minister bows out over Huawei arrest

By NATHAN VANDERKLIPPE

Tuesday, December 11, 2018 Page B1

BEIJING -- The chief executive officer of one of Canada's largest forestry companies is among a British Columbia delegation that still expects to land in Beijing on Tuesday, amid Chinese threats of "severe consequences" over the Vancouver arrest of Huawei chief financial officer Meng Wanzhou.

On Sunday, the B.C. government said it had suspended the China leg of its Asian forestry trade mission, which had been led by Doug Donaldson, the provincial Minister of Forests, Lands, Natural Resource Operations and Rural Development.

While Mr. Donaldson has made plans to return home from Tokyo, citing the furor over Ms. Meng, most of the delegation's business component intends to continue to China as the Canadian corporate sector pushes to do business with the world's second-largest economy in the midst of a worsening political storm over the arrest of a top Chinese executive.

"We're not really too concerned.

We just want to keep moving the ball forward," Canfor CEO Don Kayne said in an interview. "We're going to do exactly what we were going to do anyway, just minus a minister."

China's Foreign Ministry on Monday declined to repeat its threats of a strong response to Canada if Ms.

But he did not elaborate on what earlier threats of Chinese retaliation might entail. "What the consequences are depends on Canada itself," he said, after days of heated invective directed at the country.

Chinese Vice-Foreign Minister Le Yucheng on Saturday warned ambassador John McCallum of "severe consequences" if Ms. Meng is not released. The Xinhua News Agency then denounced "Canada's misdeeds, which are lawless, unreasonable and callous," after which the Global Times, a nationalist tabloid run by the Communist Party, on Monday accused Canada of "holding a candle for the devil."

The newspaper's editor, Hu Xijin, faulted Canada for "bringing terrorism to state and business competition."

Canadian authorities arrested Ms.

Meng at the request of the United States, which has sought her extradition and alleges she committed fraud that put U.S.

banks at risk of violating U.S. sanctions against Iran.

In Beijing on Monday, uniformed police patrolled the sidewalks around the Canadian embassy next to cruisers with flashing lights, adding to an atmosphere of tension. Commentary in state media has likened the arrest of Ms. Meng to a "kidnapping" and a "hostage-taking," while Canada's former ambassador to China, Guy Saint-Jacques, warned Canadians working in China to be "careful."

Ms. Meng's case has drawn Canada into what has become a familiar pattern in China, where authorities employ the language of outrage to chastise foreign countries Beijing deems guilty of infractions.

Many have, however, found that such threats are not always accompanied by action.

"The ratio of smoke to fire in these bombastic diplomatic Global Times performances is very high," said John Garnaut, who was a senior adviser to former Australian prime minister Malcolm Turnbull, and then a principal adviser for international matters to the prime minister and cabinet.

"In Australia, we had nine months of commentaries saying how the Turnbull government had broken the China relationship," he said. But "all that China did was gently tap on the import brakes and threaten through back channels."

China has inflicted financial punishment on some trading partners during political disputes, including South Korea, over a fight about the installation of a U.S.

anti-missile system.

"But it's rare," Mr. Garnaut said.

"They'd much prefer to scare weak and uncertain and divided nations into bending to their will than actually use economic levers - which inevitably hurt their own economy as well as the targeted country."

In Australia, Chinese anger was raised by attempts to limit foreign influence, after a series of revelations that included political donations by Chinese-born billionaires.

On Monday, Australia brought into force a new rule passed in response that requires registration of foreign agents.

Through the tensions, however, Australian trade with China continued to rise: up nearly 4 per cent in 2016 and a further 16 per cent in 2017. China is Australia's largest trading partner. It is less important to Canada, standing third after the United States and the European Union.

China's "main leverage is political leverage. It's the ability to spook politicians into backing down because of their fear of economic harm," said Rory Medcalf, a former intelligence analyst who heads the National Security College at the Australian National University.

"I would be reluctant to say that Canada can weather this without pain. But I do think that, in general, China's threats of economic coercion are usually greater than the reality."

The Canadian government appears to be sending a similar message.

Ottawa sees the Chinese "market as a very important one. So there will be politicians and business leaders who will continue to go to China," Jim Carr, Minister of International Trade Diversification, said Monday. "There will be politicians and business leaders who will continue to go to China."

Asked why he pulled out of the trip to Beijing, Mr. Donaldson told reporters: "We just believe a government minister joining the group of business people would add a different dynamic, so we decided it would be best to postpone at this point."

Mr. Donaldson said government agreements planned as part of the Chinese agenda would be postponed until a visit is rescheduled, likely sometime in 2019.

Mr. Carr said he was not aware of any request by the federal government to Mr.

Donaldson to avoid Beijing, nor was he aware of China cancelling the B.C. minister's visa.

"We understand from speaking to the embassy in Beijing that it's business as usual, and we're continuing in that regard," said Susan Yurkovich, president of the Council of Forest Industries. She plans to accompany Mr. Kayne on a trip to Beijing this week for a Sino-Canada wood conference. Joining industry figures on the trip are B.C. Indigenous and labour leaders.

Is the arrest of Ms. Meng a "risk to our business? We're hoping not," Ms. Yurkovich said. "We're hoping that there is a speedy resolution, because this is a really important market for us, and we want to continue to do business in China."

Canadian forestry exports to China have been down for the first nine months of this year but have rebounded in the final quarter, with a rise in shipments of higher-value lumber for furniture, flooring, windows and doors, Mr. Kayne said.

"We're pretty complimentary so far of the Chinese government. They've been super supportive of our industry," he said. He expressed confidence that the frictions around Ms.

Meng "will be resolved.

There's too much at stake for everybody."

Still, the Huawei dispute is different from other Chinese international spats because it concerns a telecommunications company that is central to Chinese President Xi Jinping's ambitions to build China into a global innovation power.

That elevates its seriousness to Chinese authorities, who have mounted a vigorous defence of the company.

"None of these people who claim that Huawei has violated their national security is able to show evidence for their arguments," Mr. Lu, the Chinese Foreign Ministry spokesman, said Monday.

Intelligence agencies in Canada and its allies have warned that Beijing could use Huawei technology to breach communications security. But "I am here to reiterate that China's law and regulations don't authorize any institution to force enterprises to install a backdoor," Mr. Lu said. "We hope relative countries will provide an equal, fair and transparent environment for Chinese companies."

He offered an assurance to Canadians doing business in China. China "always deals with relevant issues in accordance with the law," he said.

With a report from Wendy Stueck

Associated Graphic

Canadian forestry exports to China have been down for the first nine months of this year but have rebounded in the final quarter.